All current military members will have a Thrift Savings Plan (TSP) account created for them when they enter the service and process through payroll.
The government will automatically contribute 1% of your basic pay to your TSP. This 1% contribution is automatic, you don't have to put any of your own money in to receive it. Additionally, members are automatically enrolled to contribute 3% of their out-of-pocket basic pay to the TSP each month (they can change or stop this at any time). After two years of service, the government will match the member's contributions up to an additional 4%. So, after two years of service, members can get up to a 5% government matching contribution on top of what they contribute each month.
The TSP allows members to invest their money into a variety of investments including government-backed U.S. Treasury bills, emerging markets, corporate bonds and stocks.
Your money is automatically deposited into a fund that contains the generally accepted mix of a balanced investment portfolio for your age. These funds are called "Lifecycle Funds".
For more on each type of contribution as well as more information on the TSP program, visit the TSP section.
Tax Advantages of the TSP
Since the TSP is a retirement program, it has special tax advantages. You have two basic options for investing your money into the TSP, you can pay taxes now or pay them later.
If you contribute your money into a traditional TSP plan you do not pay any taxes on your contributions at this time. Your contributions to the TSP will not be reflected in your W-2 Earnings Statement. When you begin withdrawing money out of your TSP at retirement you will pay income tax on your contributions as well as on the earnings from those contributions.
If you contribute your money into a Roth TSP plan you will pay taxes on your contributions now. When you withdraw your money upon retirement your contributions as well as your earnings are tax-free.
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